The Penn State Law Review is proud to announce the publication of its symposium: Building the Civilization of Arbitration. In this issue, the Law Review welcomes to its pages a lineup of distinguished arbitration law scholars and practitioners.
The symposium investigates a wide variety of cutting-edge arbitration topics, ranging from recent landmark cases to investment arbitration and including the reform of the Federal Arbitration Act; the concept of private ordering in international commercial arbitration (ICA); empirical developments in consumer arbitration; third-party interests in arbitration; various provocative comparative law developments—the role of courts in national arbitration laws; a lucid evaluation of the Russian Federation’s statist concept of arbitration; an equally insightful comparison of Canadian and United States consumer arbitration; and an evaluation of an important recent book on ICA.
The symposium contains more enriching considerations on ICA, including an assessment of the difficulty of balancing the tension between arbitral autonomy and foreign mandatory public law, the impact of arbitration on the Energy Charter Treaty, and different cultural concepts of the utility of arbitration in commercial dispute resolution. Since the end of World War II and the fall of the Berlin Wall in 1989, arbitration has supplied global merchants with a transborder adjudicatory process in the face of uncertainty and the unyielding and capricious principle of sovereignty. In both domestic and international litigation, arbitration is the purveyor of the stability and effectiveness that act as the foundation of the rule of law. Finally, the Penn State Law Review symposium contains a well-crafted and conceptually invigorating Reporters’ assessment of the projected Restatement, Third, of the U.S. Law of ICA.
“It is Penn State Dickinson School of Law’s honor to welcome the authors and their contributions to the school’s effort to promote excellence in legal scholarship,” said Professor Thomas Carbonneau.
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Introduction
By Thomas Carbonneau. 113 Penn St. L. Rev. 983.
This is a time of affirmation and trepidation for the law of arbitration. Last term, the U.S. Supreme Court decided Hall Street Associates, LLC v. Mattel, Inc., holding that contract freedom in arbitration was not absolute and that the grounds in FAA § 10 were “exclusive.” This term, the U.S. Supreme Court granted certiorari to three arbitration cases. It has rendered two opinions already that signify the Court’s continuing support for and approval of arbitration. In Vaden v. Discover Bank, the Court resolved a circuit split by endorsing the “look through” approach “to determine whether federal-question jurisdiction exists over the underlying petition.” This approach favors the recourse to arbitration and its regulation by federal law. In 14 Penn Plaza v. Pyett, the Court confirmed the subject-matter arbitrability of discrimination claims that are submitted to arbitration by the parties in a provision of the collective bargaining agreement (CBA). It thereby reduced the precedential significance of Alexander v. Gardner-Denver to its “narrow holding.” When the arbitration agreement clearly provides for the arbitrability of statutory rights, all such rights are arbitrable under federal law. Accordingly, the Court aligned both forms of workplace arbitration, unionized and nonunionized, to the arbitrability holdings in Mitsubishi, Rodriguez, and Gilmer . . . [keep reading]
Dedication: Vratislav Pechota
The symposium issue on arbitration is dedicated to the work and memory of Vratislav Pechota. “Vrat” was a dedicated scholar and humanitarian. He loved his wife and family, caring devotedly for his first spouse during a long illness. As a younger man, he suffered the oppression of totalitarianism and eventually died from the effects of its insults to the human personality. He gained refuge at Columbia University School of Law through the good offices of the Parker School then its International Arbitration Center and the tutelage of Hans Smit. His voluminous work on arbitration is unparalleled in breadth and intricacy. Vrat made a monumental contribution to the study of arbitration. His spirit prevails; it could not be extinguished by communist dictators or dispelled by death.
For an extensive account of his life and work, see Vratislav Pechota Curriculum Vitae, 15 Am. Rev. Int’l Arb. (2004).
Contractual Modifications of the Arbitral Process
By Hans Smit. 113 Penn St. L. Rev. 995.
In the beginning, arbitration was straight forward. Once a dispute had arisen, the parties agreed to submit it for resolution to a third party. The courts stayed out of the process. They did not even enforce the agreement to arbitrate. But they did enforce the arbitrator’s decision.
The next step was to enforce the agreement to arbitrate. The courts were not enthusiastic about enforcing a substitute for their exclusive prerogative. The legislature had to push it, one might say, down their throats.
And then the Supreme Court went even further and ruled that, if the arbitration agreement so provided, the arbitrators were the ones to determine whether the dispute was arbitrable . . . [keep reading]
Ascertaining the Parties’ Intentions in Arbitral Design
By George A. Bermann. 113 Penn St. L. Rev. 1013.
Supreme Court case law teaches us that the federal interest in arbitration does not consist of enforcing agreements to arbitrate according to some sort of abstract or ideal arbitral model, but rather according to the particular arbitral model upon which the parties had agreed. This body of law is driven by the same notions of party autonomy that underlie the law of arbitration generally. That parties may agree to forego access to national courts in favor of arbitration is an initial manifestation of that attitude. By logical extension, the parties also enjoy extraordinary latitude in determining the features that “their” eventual arbitration should display . . . [keep reading]
Private Ordering and International Commercial Arbitration
By Christopher R. Drahozal . 113 Penn St. L. Rev. 1031.
The literature on private ordering examines how parties use extralegal means – most commonly reputational sanctions – to enforce contracts. As described by Barak D. Richman, private ordering “compares the efficiencies of private (extralegal) contract enforcement with the more traditional use of public law and state-run courts.” A series of studies by Lisa Bernstein illustrates a paradigm case of private ordering – trade associations that use industry arbitrators (private judges) to adjudicate disputes, with the arbitrators’ awards typically enforced by the threat of extralegal sanctions such as expulsion from the association. In the trade associations studied by Bernstein, the merchants opted out of the public court system and instead chose to have their disputes resolved by private judges applying industry trade rules . . . [keep reading]
Empirical Research on Consumer Arbitration: What the Data Reveals
By Sarah R. Cole and Kristen M. Blankley . 113 Penn St. L. Rev. 1051.
In 2007, Public Citizen, a “national, non-profit public interest organization,” issued a report entitled “The Arbitration Trap: How Credit Card Companies Ensnare Consumers,” concluding that the arbitration process routinely exploits consumers. Public Citizen drew this sweeping conclusion after analyzing approximately 34,000 points of data the National Arbitration Foundation (“NAF”) collected about its California arbitrations.
Unfortunately, Public Citizen’s analysis of the NAF data does not support its conclusions primarily because its conclusions cannot be extended beyond the set of cases the data contains, i.e., collection cases filed by creditors, including credit card companies, against consumers with outstanding balances on their accounts. Rather than attempt to draw conclusions based solely on this data, Public Citizen instead extrapolates its conclusions to all consumer arbitration cases even though collections cases are unique. Public Citizen ultimately concludes that binding, mandatory arbitration is bad for consumers in all situations based on a data set comprised of practically all – upwards of 99.9% – collections cases . . . [keep reading]
How Congress Can Make a More Equitable Federal Arbitration Act
By Richard A. Bales and Sue Irion. 113 Penn St. L. Rev. 1081.
When the Federal Arbitration Act (FAA) was enacted in 1925, it was meant to strengthen commercial associations’ internal arbitrations. In the years since its passage, the type and number of arbitrations have increased exponentially. In part, this increase is due to the fact that predispute arbitration agreements are now widely used for consumer contracts and many employment agreements . . . [keep reading]
Personal Autonomy and Vacatur After Hall Street
By Richard C. Reuben. 113 Penn St. L. Rev. 1103.
The Alternative Dispute Resolution movement of the last quarter of a century has been built on the pillar of party autonomy. Indeed, the very predicate of the movement is that parties can do a better job of resolving their disputes through private ordering than public courts can through public ordering . . . [keep reading]
The Relevance of the Interests of Third Parties in Arbitration: Taking a Closer Look at the Elephant in the Room
By Stavros Brekoulakis. 113 Penn St. L. Rev. 1165.
This paper examines the interests of third parties in arbitration and discusses their relevance to proceedings between parties bound by an arbitration agreement. The consensual nature of arbitration lies at the heart of this discussion: only those persons that have clearly consented to an arbitration agreement may participate in arbitration proceedings . . . [keep reading]
State Interests and Arbitration: The Russian Model
By William E. Butler. 113 Penn St. L. Rev. 1189.
The mythology of arbitration holds that this method of settling disputes is “private,” “informal” (even when arbitration is institutionalized), “effective,” “expedient,” “neutral,” “flexible,” “confidential,” “expert,” “fair,” and “inexpensive.” This is widely believed to remain the case even though these days arbitrations are “held in place by a complex system of national laws and international treaties.” . . . [keep reading]
Consumer Arbitration in the Evolving Canadian Landscape
By Genevieve Saumier, 113 Penn St. L. Rev. 1203.
The prevalence of consumer arbitration as the dispute resolution mechanism of choice for business in North America may be at risk, at least north of the border. In the three most populous Canadian provinces, Quebec, Ontario, and British Columbia, legislators and judges have declared clauses imposing arbitration unenforceable, preserving consumers’ access to courts and, perhaps more significantly, access to class actions. In so doing, these jurisdictions stand in stark contrast to the Supreme Court of Canada, which recently extended its pro-arbitration posture from the commercial to the consumer law realm by enforcing an arbitration clause in an online consumer contract, thereby putting an end to the consumer’s attempt to file a class action against the vendor . . . [keep reading]
Arbitration, Civilization and Public Policy: Seeking Counterpoise between Arbitral Autonomy and the Public Policy Defense in View of Foreign Mandatory Public Law
By Christopher S. Gibson, 113 Penn St. L. Rev. 1227.
Below the surface of the sea there are strong currents, whose direction is uncertain and whose effect may turn and tack those who float above. And so it is with international arbitration, as we set out to address the theme of this symposium, “Building the Civilization of Arbitration.” International commercial arbitration has had a globalizing impact on the law. Through centrally legislated and decentralized reforms, it has achieved a new transnational legal framework and common vision that bring with them characteristics of civilization. Below the surface, however, currents flow in contradictory directions. One area of vigorous debate concerns the proper role and scope for mandatory public law, not only in arbitral proceedings, but as a factor to be considered (or ignored) at the point of judicial intervention, whether seeking to enforce an arbitration agreement, in annulment proceedings, or at the stage of recognition and enforcement of an award . . . [keep reading]
The Civilization of Investment Arbitration
By Andrea Bjorklund, 113 Penn St. L. Rev. 1269.
In 1993 Samuel Huntington wrote about a looming clash of civilizations – what he predicted would be a cataclysmic showdown between civilizations characterized by different religions, history, languages, and traditions. Investment arbitration can also be viewed as a clash (albeit non-violent) of civilizations. It is where international commercial arbitration runs into both techniques borrowed from U.S.-style no-holds-barred litigation and the staid and measured practice common before international tribunals such as the International Court of Justice; where public international law principles vie for supremacy with municipal law and the lex mercatoria; where common law emphasis on case law meets civil law emphasis on treaty (code) provisions . . . [keep reading]
Denial of Benefits and Article 17 of the Energy Charter Treaty
By Loukas Mistelis and Crina Mihaela Baltag, 113 Penn St. L. Rev. 1301.
The Energy Charter Treaty (the “ECT” or the “Treaty”) is a distinctive multilateral treaty confined to the energy sector. The ECT was negotiated in a relatively short period of time – given the importance and scope of the Treaty, less than three years – and contains, besides the provisions on trade and transit in the energy sector, modern provisions regarding protection of investments and dispute resolution settlement. Part III of the ECT, on the investment promotion and protection, recalls the substantive protection offered by modern bilateral and multilateral investment/trade agreements. This article examines the so-called “denial of benefits” clause under Article 17 of the ECT . . . [keep reading]
Agreements to Arbitrate and the Predictability of Procedures
By Lawrence W. Newman, 113 Penn St. L. Rev. 1323.
In spite of manifold expressions of enthusiasm for it, international arbitration is not universally accepted as a means of resolution of international commercial and investment disputes. According to a recent survey, there are as many businesses that mostly use transnational litigation as there are that mostly use international arbitration. Many of these businesses may have encountered few disputes because of the way their commercial activities are conducted, and others may be able to resolve incipient disputes through negotiation, perhaps involving further commercial arrangements between the parties . . . [ keep reading]
Restating the U.S. Law of International Commercial Arbitration
By George A. Bermann, Jack J. Coe, Jr., Christopher R. Drahozal, and Catherine A. Rogers, 113 Penn St. L. Rev. 1333.
In December 2007, the American Law Institute (“ALI”) approved the development of a new Restatement, Third, of the U.S. Law of International Commercial Arbitration (the “Restatement”). On February 23, 2009, the Restaters and authors of this Essay presented a Preliminary Draft of a chapter of the Restatement (the “Draft”) at an invitational meeting in New York. The Draft addresses Recognition and Enforcement of Arbitral Awards. This brief Essay provides some reflections of the Reporters from the process of producing and presenting the Draft . . . [ keep reading]
Judicial Approbation in Building the Civilization of Arbitration
By Thomas Carbonneau, 113 Penn St. L. Rev. 1343.
The contemporary law of arbitration originated in North America and Europe. Among like-minded States with conflicting legal traditions, arbitration represented a means of transcending the diversity of legal systems. It had the additional advantages of neutrality and enforceability. Arbitration’s regional success and the globalization of national economies eventually gave it a wider, more universal vocation. A world law of arbitration emerged and developed. Not only was it global in application, but its content was modern and sophisticated. States, admittedly to varying degrees, had come to the realization that their participation and that of their nationals in the world marketplace should only be undertaken with the adjudicatory guarantees of arbitration . . . [ keep reading]
Book Review of: L. Margaret Moses, The Principles and Practice of International Commercial Arbitration (Cambridge Univ. Press 2008)
By Jack J. Coe, Jr., 113 Penn St. L. Rev. 1369.
The contemporary law of arbitration originated in North America and Europe. Among like-minded States with conflicting legal traditions, arbitration represented a means of transcending the diversity of legal systems. It had the additional advantages of neutrality and enforceability. Arbitration’s regional success and the globalization of national economies eventually gave it a wider, more universal vocation. A world law of arbitration emerged and developed. Not only was it global in application, but its content was modern and sophisticated. States, admittedly to varying degrees, had come to the realization that their participation and that of their nationals in the world marketplace should only be undertaken with the adjudicatory guarantees of arbitration . . . [ keep reading]